Short Interest in U.S. Airline Stocks on the Rise (DAL, LUV, LCC)

By and large, the short interest in U.S.-based airline stocks rose again during the first two weeks of February, after mostly declining in the previous period. The number of shares sold short in Alaska Air Group

, Delta Air Lines

, JetBlue Airways

, Southwest Airlines

and U.S. Airways

grew somewhat between the January 31 and February 15 settlement dates. The standouts are Spirit Airlines

and United Continental

, which saw the number of shares sold short dwindle somewhat during that time. AMR, parent of American Airlines, has been in bankruptcy since November 2011 and is in the process of merging with U.S. Airways. The resulting company will be called American Airlines Group. Also, shares sold short in manufacturer Boeing

rose about six percent; this was after the 787 Dreamliner was grounded. But Lockheed Martin

saw short interest decline more than nine percent in early February. The biggest percentage swings in short interest in the stocks of U.S. airlines between the January 31 and February 15 settlement dates happened to Delta Air Lines, Southwest Airlines and U.S. Airways.

This Atlanta-based air transportation company saw short interest increase less than nine percent in early February to 17.08 million shares. That was the most shares sold short in at least a year, but it represents about two percent of the float. The short interest has been rising since mid-December. In early February, Delta extended its expansion plans at JFK International Airport and shared $372 million in profits with employees. Delta currently has a market capitalization of about $12 billion and a price-to-earnings (P/E) ratio that is less than the industry average. The long-term earnings per share (EPS) growth forecast is more than 26 percent. Of the 16 analysts who follow the stock that were surveyed by Thomson/First Call, all but one recommend buying shares, five of them rating the stock at Strong Buy. Their mean price target, or where the analysts expect the share price to go, is more than 17 percent higher than the current share price. The stock has not seen that level since 2008. Shares have risen more than 16 percent year-to-date and reached a new 52-week high in early February. The stock has outperformed United Continental and the broader markets over the past six months.

Shares sold short in this Dallas-based passenger airline operator rose about 14 percent during the period to around 18.62 million. That is the highest number of shares sold short since mid-December and represents more than two percent of the float. The days to cover is more than two again. This carrier serves 97 destinations in 41 states and six destinations in the Caribbean and Central America. It has a market cap of more than $8 billion. In early February, Southwest reported slow traffic in January and announced management changes. The company's long-term EPS growth forecast is more than 32 percent. But the P/E ratio is higher than the industry average. Seven of the 17 analysts polled recommend buying shares, while eight of them rate the stock at Hold. The mean price target represents almost 12 percent potential upside, relative to the current share price. That consensus target would be a new 52-week high. The share price is up more than 11 percent year to date and reached a 52-week high last week. Over the past six months, the stock has outperformed competitor JetBlue and the broader markets.

Short interest in this Arizona-based air transport company increased more than 10 percent to 21.52 million shares, on the highest average daily volume since last April. That represents more than 13 percent of the float, and the days to cover is about two. In February, U.S. Airways and AMR, parent of American Airlines, reached a merger deal. The U.S. Airways name will disappear once the merger is completed. The company has a market cap of more than $2 billion. The long-term EPS growth forecast is more than 64 percent, and the return on equity is more than 135 percent. The P/E ratio is much less than the industry average. Eleven of the 13 analysts surveyed recommend buying shares, and none recommend selling the stock. Their mean price target is more than 28 percent higher than the current share price, which is a level the share price has not seen since 2007. The share price has pulled back about five percent in the past month, erasing the year-to-date gain. But shares are trading more than 81 percent higher than a year ago. The stock has underperformed Southwest but outperformed the broader markets over the past six months.